Posted
by
samzenpus
on Wednesday February 24, 2010 @02:08PM
from the put-me-down-for-$10-on-portman dept.

You can buy and sell actor or movie "stock" for virtual cash on the website Hollywood Stock Exchange (HSX). Starting in April the company plans on letting you turn those movie performance predictions into real dollars. HSX filed with the US Commodity Futures Trading Commission for approval as an active trading site in November 2008 and has just entered the final phase of regulatory review. Richard Jaycobs, president of HSX's parent company, said, "The number of people who visit movie theaters each year and form opinions about a film's success is in the tens of millions. We believe that's the reason the public response to this product has been very positive."

I think this is like Intrade which is a specialized gambling market. For example with Intrade you can bet if a democrat or republican will win a state and depending on how much you paid in and at what price you can return a profit.

If they want to have a predictions market they can, others do exist, but please for the love of sanity do not call it a stock market, and don't use terms like stocks and bonds in the system except in cases where those words really apply.

I'm not sure what the correct term would be. Prediction market is the normal term, but that is not ideal.

It is not a spot commodities trading market, since in those cases you take delivery of the item, or in very few markets, the standard is for the seller to hold the item o

Strike the last line there. HSX does model itself more like a stock exchange. That model probably cannot work for a real money system. Who would pay for the "stocks" when they close? If it was HSX then they would need to have the average IPO price exceed that of the closing price, which means that buying at IPO gives you a negative expected return. No thanks.

On the "virtual" side of the Hollywood Stock Exchange, the "dividends" are paid based upon ticket sales after 4 weeks. Whatever the movie has made is then given to the "investors" which can then be re-invested into other issues.

As for the real-money aspect, the original founders of Hollywood Stock Exchange always intended to get into the real-world side of the market by trying to set up an investment market for film makers that would be based upon the same general principles, where a film project could be submitted as an IPO of sorts and have some real-world investment into the actual film via micro-transaction. In other words, mere mortals could "invest" into the actual film making costs as a sort of corporate entity.

In theory, some films might end up turning a tremendous profit, and some of the early fans of the concept could pool their money together to get the financing of some interesting project off the ground through some financing scheme like this. The stocks, when they closed under this model, would pay out based strictly on what revenue comes in.... keeping in mind Hollywood financing tricks and other garbage that would have to be reviewed incredibly closely on something like this too.

Something of this nature would be certainly interesting. Unfortunately, based on this very limited information in this article it doesn't sound like that is going to be the route this particular group will be going. It sounds more like something more akin to what Las Vegas casinos do with sports events and people betting on the success or failure of a given team winning a game. If that is the case, this would most certainly have to be classified as a gambling activity and not a legitimate security exchange.

That particular experiment, to "buy out" HSX dollars, was tried back in the early days of HSX. I think the going rate at the time was 1 cent per 1m HSX bucks or something like that, with a minimum payment of $100 USD (presuming you were good enough to get into the "billionaires" club with HSX).

That particular experiment is dead and doesn't appear to be something to be revived.

No, we are talking about folks who invest real money into real movies that get spent on real actors and producers to be shown on rea

It's a way for them to make money off of ad dollars and you. Plus they get to advertise up and coming movies to draw attention to it.

I've seen stuff like this done before, and it is more subjective then a vindictive english teacher on a red marker spree.

If they don't ask for the end-users credit card (e.g. buy more cash) then this site should be a fine amusement, but if they say "fund your account of virtual money with real money" then that is a problem...again, unlike the real stock market, the stuf

More like..
'To part Fools and their Money.'
In the words of Gordon Geckko....'Greed is Good'..
yeah...right, until the economy nosedives into the crapper, you and your spouse are on Unemployment, maxed out on credit cards, paying 4 car payments (yours, your spouse, and your two kids), College Expenses, a boat payment and you're upside down by over 20% in your house. (not me, thankfully just a generalization what may be out there)..
The point is..live well within your means, save money (6 months complet

That's because this idea has been floating around for awhile. This company was founded by Max Keiser, [wikipedia.org] who created a model that would allow you to set up a Stock Exchange based on any market. Keiser, to say the least is a very colorful character.

Scarily enough, the Pentagon had once wanted to set up a similar stock exchange that would rely in predicting when terror attacks would occur.

He is doing a very interesting project called Pirate My Film where producers can finance their films by selling future copies

Idea/prediction markets are actually a hotbed of research, and there are several different theories about what could've happened with the terror attack thing. In any case, it was less about specific terror attacks and more about stability indexes for different parts of the world, etc.

By the way, there's awesome open source software [sourceforge.net] under active development for running your own prediction markets and experiments with prediction markets.

Now instead of getting spam about how selected penny stocks on the Vancouver and Hong Kong exchanges are set to explode and make me hundreds of thousands of dollars, I'll get spam about how "TEH A-TEAM MOVIE IS THE BOMB!!!1!! BUY NOW!!!!1".

FWIW, I've been playing the old, free version of HSX for over ten years, and HSX has utterly botched not one, but two beta releases (ask anyone who was on their forums about the V2 rollout and how that went). No way, no how am I letting them anywhere near my real money.

Also, how is there any way this won't be rife with insider trading and other criminal activity? Movie production staff are not licensed/fingerprinted/sworn to secrecy the way execs at publicly traded companies are. Not to mention, how easy would it would be for organized crime to short sell a particular movie, and then make sure the star OD's or has an "accident" in the middle of production.

Not to mention, how easy would it would be for organized crime to short sell a particular movie, and then make sure the star OD's or has an "accident" in the middle of production.

Traditionally, doesn't that make box office returns soar, not sink?

I can think of some TV shows that were canned after a major actor croaked. Specifically one Sy-Fy vampire TV show a couple years back based on the RPG game where the lead actor killed himself on a motorcycle in Jolly Ole England so they canceled the show after a couple episodes. OR maybe the ratings sucked and that was a great excuse.

I didn't see that for the acting, I went for the magic trick. Why? Because everyone loves magic tricks. It was well worth the ticket and concessions.

Heath's performance was a nice bonus, and I'm going to say the movie's success depended a lot more on it being a pretty well done movie than on a star dying. You need a quality movie in order for a death to boost sales, and it's free advertising at that point. If the movie sucks, all of the death coverage will mention "... who is in the crappiest movie eve

Also, how is there any way this won't be rife with insider trading and other criminal activity?

Insider trading isn't automatically illegal or bad. As far as I know, it is illegal only for stocks and similar securities. Second, one of the points of a market like the HSX is to come to a consensus about the expectation of some future event (such as how much money a new movie will make). If you exclude insiders, you lose the most valuable source of information.

Second, one of the points of a market like the HSX is to come to a consensus about the expectation of some future event.... If you exclude insiders, you lose the most valuable source of information.

That's true of stocks as well, with the future event being the price of the stock (or some influencing factor). The real problem with insider trading is conflict-of-interest: the insider, as an agent of the shareholders, is manipulating the stock prices or using privileged information for personal gain at the expense of his/her principle(s). If you're not in an agent/principle relationship then insider trading doesn't really apply. (Note that this can be an implied relationship. Further note that I am not a

The real problem with insider trading is conflict-of-interest: the insider, as an agent of the shareholders, is manipulating the stock prices or using privileged information for personal gain at the expense of his/her principle(s).

Did I mention that I'm also a fan of market manipulation and of ignoring conflicts of interest in the market (conflicts of interest IMHO should be delegated to contract law not enforced at the level of the market)? I guess at this point, I must look like a crazed neo-liberal, globalizing the hell out of your Slashdot thread. The thing is a lot of market behavior has been made illegal because it is unfair. But it is worth remembering that fair trading is a myth. There are plenty of people with privileged inf

So what you're saying is you'd like to remove the few rules left that actually apply to the advantaged few, so that it's fairer for the disadvantaged?

It's not going to be fair to the disadvantaged no matter what. But the market will be more efficient and the gullible and ignorant will get screwed quicker and more efficiently. There's a moral hazard associated with comfortable regulation. It creates artificially high complacency. Knowing that nothing protects you from insiders is better than thinking incorrectly that something protects you from insiders.

Efficient as in society doesn't spend more effort than it has to generate the same end result. That is, you don't have a bureaucracy determining whether or not the gullible and ignorant lost their money in an acceptable, properly documented manner. And nobody isn't under any illusions that government (or some other big, friendly, and totally unaccountable organization) is looking out for them when it's not.

I find it hard to believe it is even illegal in the usa. When i am at the gym, there are many ads for party poker and other online gambling sites. Not sure what country you are from, but if american TV channels are any indicator, online gambling is alive and well in the USA.

Of course, if i were to run a "online weed distribution" business, THAT would probably be shut down quick, because its actually illegal to sell.

It is illegal to do on-line gambling in the USA. It is even more sinister than that: Any debts that happen via on-line gambling are legally unenforceable. In other words, if you run up a huge tab on your credit card for on-line gambling, all you have to do is simply assert that the debt was done for the purposes of gambling on-line and the debt will be instantly forgiven by the bank (or take the bank to court for dismissal of the debt... the same thing after a fashion). The bank either writes off the de

If you would read my reply, it is essentially the same thing. BTW, even if it may not be "illegal" according to federal law, it may be according to state or local laws.

So even if you may be transferring funds from an account in say the UK or Switzerland into the on-line gambling site (so you avoid the restrictions), it may still be illegal in many localities simply for being connected at all as an individual.

Still, by prohibiting banks from the USA to process money transfers to the on-line gambling compani

Its actually not that bad to get money to those sites yet- they still take western union after all. Or direct withdrawl if you don't mind giving them your bank info (something I'm leery of). Its harder than it was, and it definitely has cut down the US player base (and many of the poorer players especially:( ) but anyone who really wants to still can without too much problem.

I can just see it now, just like how wall street controls cooperations, putting $$$ in front of quality, and innovation. The same will happen to hollywood. Not that that doesn't happen now, it would just be worse.

So when is the sports stock exchange opening? I sure would love to bet... eh ehm I mean, "exchange and buy stock", for my favorite team.

That WAS tradesports, a sister website of intrade.

tradesports flamed out utterly spectacularly in 2008 for no apparent reason.

I was always mystified how two sister sites under the same company, presumably sharing code, management and backend equipment, could have one self immolate itself so thoroughly yet the other one seems just ducky even years later.

My guess is the mafia guys told them to butt out of the sports betting business, or else... That would explain a whole lot about that situation.

I thought the reasoning was that sports betting was tarnishing their image (and maybe raising regulatory questions) as the InTrade portion was growing so they opted to shut down the questionable side of their business.

Pressure from organized crime might make sense but there is a good business reason for dropping it too

Ideosphere/Foresight Exchange and Intrade are much more interesting. Both market "real world" events instead of hollywood flakes.

Ideosphere/Foresight is free, intrade is real dollars.

Ideosphere is semi-comatose, and the email list is currently filled with a debate over what exactly "astrology is true" means, which is at least somewhat more interesting than the past six months debating if an ipod touch/iphone is a real computer or not.

Intrade, last time I checked, is very much alive. Once I feel I know what I'm doing with monopoly money on ideosphere, I have been planning on moving to intrade and investing real money. At my present rate of learning, which only exceeds my weight loss program for failure to progress, I'll be moving to intrade right around the year 2100.

Both have been around for "forever" on the internet. The only new thing about HSX is that its securities are based on the actions of hollywood drug addicts, thus inherently unpredictable, whereas you can gain an advantage by trading intelligently on ideosphere and intrade. HSX is pure gambling, intrade is investing or at least intelligent speculation. Two inherently different activities.

It seems like another way for Hollywood to steal money, but maybe a similar idea could have merit...

Now we have a bunch of "producers" who listen to a bunch of ideas and determine which has potential for making money. They grab the least offensive ideas that can be marketed to a wide group of consumers.

Way back, when people wrote plays and stories, the writers would get a bunch of people to underwrite (i.e., subscribe) the cost of writing a story. If the author was good he/she could earn a decent living.

I'm confused. If this is a game, or strictly entertainment, why do they need to be registered with the U.S. Commodity Futures Trading Commission? If this is a real trading forum, what exactly do you own? May I expect a distribution from Angelina Jolie's next big blockbuster, because as a shareholder, I expect her first and only priority is to maintain and enhance shareholder value.

I didn't think it was legal to own a person. Maybe it's legal if you only own a small percentage of a person.

Nobody's responded in an hour, yet a bunch of questions is modded +4 insightful?

If this is a game, or strictly entertainment, why do they need to be registered with the U.S. Commodity Futures Trading Commission?

They wanna trade real money futures contracts. Technically they want to write futures contracts, and it just happens they are trading them on their own private exchange. Then again I am not a futures contract lawyer, just a futures contract trader, and minutia of the legal document don't interest me as much as the market price vs my opinion of its value.

If this is a real trading forum, what exactly do you own? May I expect a distribution from Angelina Jolie's next big blockbuster, because as a shareholder, I expect her first and only priority is to maintain and enhance shareholder value.

Futures work a totally different way than you describe. You mention Ms Jo

I chose Ms. Jolie simply because I expect most folks will know who she is and what she does. And yes, I'm sure she would cause me headaches.

I understand how futures contracts work. For money exchanged today, we agree that I will buy "Product A" at an agreed-upon price at a specific date in the future. If Product A's market price drops below the futures contract strike price, I'm losing money (had it been a futures option, I could back out, worthless piece of paper in-hand.) Regardless, the futures c

Regardless, the futures contract is... associated with tangible property at some point.

The ticket the GP described is also tangible property.

What you're describing with "vlm 69642 will pay the owner of this ticket $1 if Ms. Jolie's next movie is an absolute stinker" is gambling, not commodity futures trading.

You're right that the system described is a form of gambling, but so is commodity futures trading. Gambling occurs any time you make a choice where the resulting profit or loss depends on some as-yet-undetermined future state. It makes little differences whether that future state is the price of a traditional commodity or the success of a movie.

If you want to argue over whether the ticket counts as a "commodity" be my guest, but that's not really the iss

No, I'm not. They're more "insurance policy" than securities. I really think our financial system is in trouble. You can magically convert intangible things like "the weather" into pseudo-tangible entities by wrapping them up in a pretty bow and changing the name (i.e. call them "derivatives".) That's bad, especially when the item that's supposed to be "securing" the derivative turns out to be an IOU written on a bar napkin.

The point of the article is that real money is going to be used and that they have filed with the SEC for "approval" as a real exchange.

As for what these guys are going to be actually buying and selling on the exchange, that is a different issue. On that, I have my doubts. It sounds like something even more intangible than the marginal insurance on Collateralized mortgage obligations [wikipedia.org] that caused this current recession in the first place. The article about this concept doesn't really go into enough detail

As I see it, this is purely to the benefit of movie companies. I see two uses of this for them:

1. Propose a movie idea and put it on the futures market and see how it does. Don't make movies that don't do well. Cost to them is nearly nothing, but upside is preventing losses.

2. Hedge risks of investing in a movie or an actor. This is a big one in my opinion. The movie company bets against one of the movies they have in production or one of the actors they have under contract. If the movie bombs or acto

Perhaps this could herald the beginning of a reputation-based currency?
I'm not sure if there's earlier references to this concept, but the one I remember is from Cory Doctorow's book, "Down and Out in the Magic Kingdom".
http://en.wikipedia.org/wiki/Whuffie [wikipedia.org]

HSX is a hoax more or less... and once you figure out that you can just bet the farm on the weekends big releases and then short sell the hell out of it the Monday afterwards, you'll be at $100 million in no time and bored out of your freaking mind. Rinse and repeat.

I always thought of a market to invest in film production, where your money went to actually finance a movie and entitle you to a share in revenue (if any). However, film making is a high profit low risk business and as such is reserved to a select number of people, and I'm not sure they need the mass investors for financing, they have enough money.